Should Disney buy Netflix?

Rumors persist on Disney hatching a plan to purchase online streaming giant Netflix, but there is no evidence of any pending deals yet. Still, the articles on this topic keep coming, so a short overview of the story is in order.

By now, most journalists outlined the main advantages to a hypothetical deal. The entertainment industry is shifting towards online streaming, while Disney’s standard cable networks such as ESPN are struggling in the new era.

If Disney bought Netflix, the company would acquire “streaming know-how and 87 million subscribers worldwide,” and possibly Netflix Founder Reed Hastings as a new Disney CEO, according to Reuters’ Jennifer Saba.

“The $160 billion entertainment conglomerate is on the hunt for technology to connect consumers directly with its movies and TV shows,” she wrote. “It’s also in need of a successor to Chief Executive Bob Iger.”

Bernstein analyst Todd Juenger is optimistic too, as explained by Rick Munarriz on The Motley Fool:

“Juenger suggests that, while Disney could possibly build up a platform that could challenge Netflix for a lot less than the streaming darling’s present $50-billion market cap or the roughly $70 billion that it would require to seal a deal … It would take years and a major drag on its bottom line to achieve a shot at market leadership.”

“Disney buying Netflix would make it the unquestionable top dog overnight.”

The price tag is a nagging concern of skeptics though.

“ … any premium paid for Netflix stock would mean a price for Disney of at least $65 billion. That’s over one-third of the current market capitalization of Disney stock,” Vince Martin warned on InvestorPlace.

Martin pointed out that Disney only spent “between $4 billion and $7 billion each for Pixar, Marvel and LucasFilm.”

In addition, there is a danger companies will be hesitant to put shows on a Disney-owned streaming platform.

Munarriz speculated, “It will try to be unbiased on the surface, but you just know that Disney-studio content will trickle into the digital vault, and the moment it gets promoted, rival studios will be up in arms.”

A recent Variety article also quelled any hype about a Disney-owned Netflix.

Todd Spangler wrote, “CEO Reed Hastings has shown no signals that Netflix is looking for a buyout.”

Regardless, Disney is set for an exciting year with expected movie hits Beauty and the Beast releasing in March and Star Wars Episode VIII coming in December. While Netflix would be an interesting purchase, Disney could wait and study the online-streaming market a little longer before making a major decision to get into the mix.